LONDON, England - August 10, 2008 - The CBI, the UK's largest employers' organization, has warned that the UK economy is deteriorating faster than it previously thought.

There was "no doubt that the mood has darkened in the last two or three months," its director general, Richard Lambert, warned members in a letter.

Forecasters, including the CBI, had been "over-optimistic" about the economic outlook, he added.

High inflation and slowing growth have prompted fears of a possible recession.

“The level of inflation - which most analysts expect to surpass 4% when the July figures are released this week - had taken people by surprise," Mr. Lambert wrote in the letter.

And he added that the credit crunch had been "bigger and broader" than first expected.

"A year ago it seemed reasonable to hope that the worst would be over by now. That has not turned out to be the case. The CBI, along with most other forecasters, has been consistently over-optimistic about the economic outlook over the last 12 months," added Mr. Lambert.

He said that there were still many companies who were doing well - especially in the manufacturing of high value items. But he conceded that it was going to be an "uncomfortable time" for many.

"A sharp economic slowdown is a new experience for many people in government and in business," he said.